Institutional demand for perpetual futures remains limited, with the products largely viewed as speculative trading instruments rather than viable replacements for traditional derivatives, according to a Monday report by Wall Street bank JPMorgan.
Based on conversations with clients and market participants, the bank said institutional interest in perpetuals has been muted. While the contracts offer 24/7 trading and eliminate futures roll costs, most activity is driven by traders seeking leveraged directional exposure rather than producers, consumers or other participants hedging underlying market risk.
“Our due diligence within J.P. Morgan suggests that there is no/limited institutional demand that our desks are seeing,” the bank’s analysts said in the Monday report
“The consensus opinion seems to be that perps activity is more akin to speculative use cases by traders versus hedging by producers/consumers or those players with real exposure to the underlying,” the analysts added.
The report argued that perpetuals offer few incremental benefits over legacy derivatives for institutional investors. On-chain perpetuals are unlikely to appeal to U.S. institutions because they lack traditional clearing protections, while off-chain products reduce roll risk but retain other structural drawbacks.
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